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Income Tax Appellate Tribunal, DELHI BENCH, ‘B’ NEW DELHI
Before: MS. SUSHMA CHOWLA & DR. B.R.R.KUMAR
आदेश / ORDER आदेश आदेश आदेश PER SUSHMA CHOWLA, JM: The appeal filed by assessee is against order of CIT(A)-2, New Delhi, dated 28.10.2016 passed u/s 143(3) of the Income Tax Act, 1961 relating to assessment year 2012-13.
ITA No:326/Del/2017 Assessment Year: 2012-13
The assessee has raised following grounds in this appeal:-
“That the Ld. Commissioner of Income-tax (Appeals) grossly erred on facts and in law in sustaining the disallowance of Rs. 1,36,85,065/- made u/s. 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1962. 2. That the Ld. Commissioner of Income-tax (Appeals) grossly erred on facts and in law in sustain the disallowance of Rs. 55,27,111/- holding expenditure to be capital in nature as against the claim of the appellant company to be Revenue in nature. 3. That the Ld. Commissioner of Income-tax (Appeals) grossly erred on facts and in law in sustaining the disallowance of Rs. 8,07,800/- under the head Personal expenditure as against the claim of the appellant company treating this expenditure as Business Expenditure. 4. That the appellant craves, leave to add, amend or alter any grounds of appeal either before or at the time of hearing of appeal.”
The first issue raised by the assessee is against the disallowance
made u/s 14A of the Income Tax Act, 1961 (in short “Act”) at
Rs.1,36,85,065/-. The Ld.AR for the assessee at the outset pointed out
that the disallowance if any, u/s 14A of the Act could not exceed the
exempt income which was Rs.2,61,000/- during the year. In this regard,
he placed reliance on the ratio laid down by Hon’ble Delhi High Court in
the case of Joint Investment P.Ltd. vs CIT 372 ITR 694 (Del.).
The Ld. DR for the Revenue placed reliance on the orders of the
authorities below.
ITA No:326/Del/2017 Assessment Year: 2012-13
We have heard rival contentions and perused material available on
record. The first issue raised in the present appeal is against the
disallowance made u/s 14A of the Act. As against the dividend income of
Rs.2,61,000/- which was claimed as exempt income under the provisions
of the Income Tax Act, the Assessing Officer worked the disallowance u/s
14A of the Act at Rs.1,36,85,065/-. The Hon’ble Delhi High Court in the
case of Joint Investment P.Ltd. vs CIT (supra) have laid down the
proposition that disallowance if any, under section 14A of the Act is to be
restricted to the amount to tax free income. Following the said ratio laid
down by the Hon’ble Delhi High Court, we direct the Assessing Officer to
restrict the disallowance u/s 14A of the Act to Rs.2,61,000/-. Thus,
Ground No.1 raised by the assessee is partly allowed.
The Ground No.2 is against the disallowance of Rs.55,27,111/-
holding the expenditure to be capital in nature.
Briefly facts relating to the issue are that the assessee had claimed
certain expenditure as revenue expenditure in its hands. The break-up of
the expenditure is available at page 5 of the assessment order. The
assessee claimed the said expenditure to be incurred for carrying on its
business and hence, the claim u/s 37(1) of the Act. The total expenditure
is Rs.61,41,968/-. The Assessing Officer was of the view that incurring of
the said expenditure had enduring benefit to the assessee and hence, was
capital in nature. He disallowed the said expenditure, but allowed
depreciation on the same and hence, the disallowance at Rs.55,27,111/-.
ITA No:326/Del/2017 Assessment Year: 2012-13
The CIT(A) upheld the same, against which the assessee is in appeal
before us.
We have heard rival contentions and perused the material available
on record. The details of the expenditure disallowed by the authorities
below is as under:-
Sl.No. Dated Item/Name Amount(Rs.) 1. 18-May-11 Installation Charges 3,03,325 2. 17-Jun-11 Installation Charges 55,150 3. 02.08.2011 Supply and installation of 6,27,932 Boiler Tubes 4. 14.03.2012 Electrical Work 1,55,040 5. 28.03.2012 Electrical Work 24,19,456 6. 07-Jun-11 Teak Wood chair 10,68,750 7. 07-Jun-11 New Toughed Glass entrance 2,51,064 door 8. 07-Jun-11 Entrance door 2,51,064 9. 12.02.2012 Partition Work 5,05,829 10. 27.08.2011 Fabrication GI ducting 1,14,039 11. 13.01.2012 FCU Installation 1,03,983 12. 26.08.2011 Electric Work 1,34,296 13. 14.03.2012 Electrical Work 1,55,040
The Ld.AR for the assessee pointed out that Item No.4 in the said
list and Item No.13 in the said list dated 14.03.2012 is same and double
addition has been made in the hands of the assessee on this account. On
perusal of the tabulated details in the assessment order, we find merit in
the plea of the assessee and hold that double disallowance has been made
on account of Rs.1,55,080/-. Similarly, Item Nos. 7 & 8 which is against
the invoice dated 07.06.2011 has been considered by the Assessing
Officer twice, resulting in double addition. Hence, we delete the sum of
Rs.2,51,064/- on this account.
ITA No:326/Del/2017 Assessment Year: 2012-13
The Ld.AR for the assessee further fairly submitted that Item No.6
i.e. purchase of Teakwood chair totaling to Rs.10,68,730/- is to be
capitalized in the hands of the assessee. In reply to query of the Bench,
Ld.AR for the assessee pointed out that expenditure of Rs.6,27,932/- was
against supply and installation of boiler tubes i.e. it was repayment of
the earlier boiler tubes and no new asset came into existence. Similar
was a plea in respect of electric work totaling to Rs.24,19,456/- vide
invoice dated 28.03.2012. The Ld.AR for the assessee pointed out that
the said electric work was carried out for running the business more
efficiently and this expenditure was incurred on different floors of the unit
of the assessee and was revenue in nature.
The Ld DR for the Revenue strongly objected to the submission of
the assessee.
In the totality of the facts and circumstances of the case, we are of
the view that the expenditure incurred by the assessee for smooth
running of its business is to be allowed as revenue expenditure. Further,
by incurring the expenditure, no new asset had come into existence and
hence, there is no merit in making the aforesaid disallowance in the
hands of the assessee except the expenditure of Rs.10,68,750/-.
Accordingly, we allow the expenditure as revenue expenditure in the
hands of the assessee and direct the Assessing Officer to capitalize the
expenditure of Rs.10,68,750/- and allow depreciation on the same.
Hence, Ground No.2 raised by the assessee is partly allowed as indicated.
ITA No:326/Del/2017 Assessment Year: 2012-13 13. The last issue in present appeal is against the disallowance of
travelling expenditure totaling to Rs.8,07,800/-, holding the expenditure
to be personal in nature. In the hands of the assessee, the expenditure
has been incurred by the assessee on the travelling of the Directors and other employees of the assessee for foreign travel to Ghana, South Africa.
The said expenditure is on air tickets and purchase of dollars. The
assessee is a limited concern and there is no merit in the orders of the
authorities below in making the aforesaid disallowance on account of
personal nature. We reverse the findings of the authorities below and
allow the claim of the assessee in entirety.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 16th day of October, 2019.
Sd/- Sd/- (B.R.R.KUMAR) (SUSHMA CHOWLA) लेखा सदःय लेखा सदःय/ACCOUNTANT MEMBER �याियक सदःय लेखा सदःय लेखा सदःय �याियक सदःय �याियक सदःय/JUDICIAL MEMBER �याियक सदःय �द�ली / �दनांक Dated : 16th October, 2019. �द�ली �द�ली �द�ली * Amit Kumar * आदेश क� ूितिल�प अमे�षत/Copy of the Order is forwarded to : 1. अपीलाथ� / The Appellant; 2. ू�यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT(A) �वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, �द�ली / DR, ITAT, Delhi 4. 5. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार
स�या�पत ूित //True Copy// सहायक र�जःशार,
आयकर अपीलीय अिधकरण ,�द�ली �द�ली �द�ली �द�ली Assistant Registrar, ITAT, Delhi